GBP/INR is surging in early trading on Friday, extending the bullish trend that took off late on Monday. Currently, the pair is trading at 92.945, up 0.35% as of 7:00 AM UTC. The price has increased over 0.90% since late Monday, though a steep decline early on Monday cut the weekly gain figure.
The rupee’s decline comes amid increased optimism around the trade deal between the US and China. As a rule, US-China trade hopes are a good signal for the Indian currency, given that Asia’s third-largest economy relies on trade. However, at this time, things are a bit different, as the trade optimism has also contributed to an increase in the US dollar and surging oil prices, which hit Indian importers.
V K Sharma, head of PCG & Capital Market Strategy, explained:
“Indian rupee depreciates on month-end dollar demand from importers. Rupee fell […] amid higher crude and stronger dollar against Asian currencies. Globally, the trading volumes remained light on back of year-end holidays.”
Sharma added that the rupee might continue the bearish rhetoric next week on year-end adjustments by foreign institutions.
On Tuesday, US President Donald Trump said that he and Chinese counterpart Xi Jinping would participate in a signing ceremony to ink the phase one trade deal, which is about to end the 17-month trade war between the world’s two largest economies. He told the press:
“We will be having a signing ceremony, yes. We will ultimately, yes, when we get together. And we’ll be having a quicker signing because we want to get it done. The deal is done, it’s just being translated right now.”
On Wednesday, Chinese Foreign Ministry representative Geng Shuang confirmed Trump’s statement, saying that both countries were in close communication.
The pound might have reacted positively on a report published by British think tank Resolution Foundation, according to which real wages in the UK would increase early next year to highest levels in a decade. However, economic growth will remain slow. Also, there are early signs that the employment will retrace from record figures.